My intention is to use the VM as a local development server. Use Windows 7 for all IDE/e-mail/web/etc needs and just use the server to test and commit my code. The Windows IDE and the VM's web server would be operating on the same source code.

For those desperately looking for a workaround, below is a hack I just added to svn_io_remove_file and svn_io_file_rename in subversion-1.6.12. It works for me but still needs dmode=755 in the mount options.